CIT Home Lending Shut Down

August 28, 2007 No Comments »

CIT Group Inc. announced early Tuesday morning that it would shut down its home lending business in response to weak investor demand and heavy losses.

The company had experienced an unexpected second-quarter loss which seemed to be decision enough for CIT to shutter its home lending division.

CIT home lending focused primarily on subprime loans, a category that has been under intense scrutiny since the mortgage crisis blew open months ago.

Back in January, CIT made an effort to tighten lending standards by raising minimum credit scores, lowering maximum loan-to-values, and making more calls to borrowers behind on mortgage payments.

But apparently those changes weren’t enough to turn the struggling consumer lending division around.

CIT said home loans on which it couldn’t collect interest increased from $18.8 million a year ago to a whopping $38.4 million this year.

Some analysts believe CIT may exit their student loan business next as they continue to move away from the consumer side of their business model.

The company expects charge-offs of about $45 million to $50 million in the third and fourth quarters as a result of the closure.

No new loan applications can be submitted to the mortgage lender, but it is believed that existing applications will continue to be processed by a skeleton crew.

Shares of CIT were trading down less than a buck, or about 2.5% to $36.30 on the news.

See the complete list of closed lenders, layoffs, mergers, and rumors.

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